Hindalco's first share sale through QIP generates 3X demand

India's first ever metal industry share sale through qualified institutional placement (QIP) floated by Hindalco Industries generated overwhelming response in the market last week. Institutional investors lapped up the shares which went on to reinforce their confidence in the aluminium major’s manufacturing success.

The QIP- the largest non-bank issue since Indiabulls’s QIP in 2015, saw demand surging more than 3 times and exceeded US$1.5 billion, reported sources aware of the matter.

Hindalco had priced the QIP at a premium of 2.7 per cent to the Sebi floor price of INR 184 per share. The Capital Raising Committee of the company at its meeting held on 08th March 2017, inter alia, passed the following resolutions:

• Approved the closure of the issue period for the QIP on 08th March, 2017;
• Determined and approved the Issue price of INR 189.45 per Equity Share (including a premium of INR 188.45 per Equity Share);
• Approved and adopted the placement document dated 08th March, 2017, in connection with the QIP.

“Unlike the usual trend of hedge fund interest in cyclical industries like metals and mining, this time the demand was from large longonly investors who covered nearly 23rd of the issue. This reaffirms faith in quality offerings. This would be the largest QIP from India Inc in 2 years,” said Vishal Kampani, MD, JM Financial.

JM Financial, Bank of America-Merrill Lynch, Axis Bank and Citi were mandated for the share sale.

As analysts find it, the fund will be used predominantly to reduce debt. Hindalco’s net debt currently stands at INR 55,500 crore on a consolidated basis. Its Indian operations have INR 32,000 crore of debt on EBITDA of about INR 5,416 crore in the past one year.

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“Our focus would be to bring down debt-to-EBITDA to less than 3,” said Satish Pai, MD Hindalco. The company has already pre-paid INR 1,000 crore of debt so far in the 2016-17 financial year and expects to make another prepayment of INR 1,400 crore in this FY and INR 2,500 crore in the next fiscal.